In December 2024, Gold Fields, one of Ghana’s top 3 gold producers, applied for a renewal of its Damang mine license, expiring tomorrow. This week, the govt said no.
The govt’s reasons are an interesting mix. In the current nationalistic climate, the bits about putting Ghana first and abandoning the “colonial approach” will be music to many ears. (But it also raises questions about what the NDC government’s approach to the lithium find would be.)
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The government says that mining companies have become too comfortable in Ghana. That the days of automatic renewal of licenses are over. In fact, it is not only rejecting Gold Fields’ application to keep mining at Damang, it is taking over the mine tomorrow. This is where it gets a bit tricky. No one doubts that of the two mines Gold Fields run in Ghana – Tarkwa & Damang – the main one is Tarkwa. It is the largest open-pit gold mine in the country by a stretch. Yes, Newmont’s Ahafo is humongous but it isn’t primarily open-pit. Namdini is the biggest single-stream mine, but it would be a while before other plays in the concession are developed. Also, Tarkwa has been adding resources whilst Ahafo has been depleting. And if the government allows the merger of Tarkwa with Anglogold’s Iduaprem, the efficiencies will go through the roof. In that sense, the takeover of Damang is not the end of Gold Fields in Ghana.
Still, Damang is not a joke. Last year, Gold Fields processed stockpiles of more than 230k tons, which in today’s frothy gold market, would be worth more than $700m. We are talking big money.
It is not clear whether in taking over, the government intends for the company to transfer the stockpiles it has mined with its own resources and which are worth hundreds of millions of dollars.
Given that the brother of the President is the main contractor (E&P) at Damang, it would look a bit untidy if the government was to resume active mining and then enter into negotiations with E&P on terms. Would the government pay more than Gold Fields? Would analysts interpret the govt’s timing to resume active mining as supportive of E&P’s business since the slowdown at Damang has hit E&P quite strongly?
Since the govt says it doubts Gold Fields’ latest analysis that there is enough gold at Damang to justify continuous mining, what exactly is its own plan for keeping the ~1500 workers? Why should a govt trust its own ability to find gold and keep a mine running than the world’s 7th largest gold mining company? Gold Fields says it has a model for sustaining production in a geologically complex mine. It is willing to keep workers and risk capital. What is the govt’s own strategy?
Will the govt have what it takes to walk away and cancel E&P’s contracts if it finds out that the gold reserves at Damang are subcommercial, given E&P’s political influence (which cuts across the political divide)?
And given that some very senior officials of the regulator – the Minerals Commission – are former E&P staff?
